Malaysian Stocks -
Equities in Malaysia
The Malaysian Plays
Companies in Malaysia will benefit from China’s growth
One country that will benefit well from China’s growth is Malaysia. With
abundant natural resources of oil, gas, palm oil, rubber, tin, and others,
as well as it’s a quarter ethnic Chinese population, Malaysia will provide
raw materials, energy, and foreign investments for China’s expected economic
Politically, Malaysia is expected to remain stable. In October, 2003, Dr.
Mahathir Mohamad, then the Prime Minister of Malaysia, stepped down. Abdulla
Ahmad Badawi, an avuncular Islamic scholar and former Foreign Minister with
a quarter of Chinese blood, came to power. His made mild personnel changes
to his cabinet but with rather drastic changes in his government policies,
aimed at fighting corruption and making the government more transparent.
While others criticized him for not being more progressive in his cabinet
selections, stability would be more easily achieved by keeping most of the
former members in.
Economically, Malaysia has maintained a trade surplus with the rest of the
world since 1998, partially thanks to the devaluation (and pegging to US
dollar) of its currency, Ringgit. It is expected that Ringgit will continue
to be pegged to US dollar. Although about 20% to 25% of Malaysia’s exports
are electronic products, its agriculture sector presents promising growth.
In fact, February (2004)’s palm oil exports increased 38% compared to
previous year’s levels, and total exports to China increased 32% on a
Malaysia’s stock market also presents
opportunities. Currently, private US investors cannot purchase Malaysian
shares (not even ADRs or pink-sheet stocks), which is a plus sign for
intelligent investors to be front-runners. Malaysia’s plantation companies,
transportation companies, and companies related to tourism would be the
direct beneficiaries of the growth of China, while electronic product
manufactures would face competitions from increased cheap products coming
out of China.
Malaysia Will Benefit from the Economic Growth of China
Malaysia, a middle-income country, transformed itself from 1971 through the
late 1990s from a producer of raw materials into an emerging multi-sector
economy. Today, about a quarter of all Malaysian’s exports are electronic
products. However, as demand from China for raw materials and natural
resources grows as expected, agriculture and energy related exports will
play a more important role. Please see
China effects on commodities market.
Malaysian plantations as well as transportation companies will be the
primary beneficiaries of this China commodities effect.
Companies related to tourism will be another industry that could benefit
investors. On my trip to Malaysia, I discovered that flows of Chinese
tourists were visiting Malaysia. In fact, Malaysia is one of the countries
that provide the easiest access for Chinese tourists in terms of visa
application. For Chinese people who wish to travel abroad for pleasure,
while obtaining a US visa is impossible and applying a Singapore visa
requires sponsorship from a Singaporean (unless you are traveling with a
group), Malaysian entry visa can be obtained easily for less than 10 US
dollars. Hotels, gambling casinos (read why Chinese people love to gamble),
and transportation companies flourish from Chinese tourists.
Politically, Malaysia Remains Stable
Perhaps we still remember former Malaysian Prime Minister Dr. Mahathir
Mohamad’s blame to international capital flow for causing the Asian
Financial Crisis in 1997. Dr. Mahathir served as a Prime Minister for
Malaysia for more than two decades. He was responsible for devaluating and
pegging the Ringgit to the dollar following the financial crisis. He also
imposed capital control, and foreign investors (mainly investors from
Singapore), sold Malaysian shares in panic.
Five years later, in October 2003, Abdullah Ahmad Badawi became Malaysia’s
new Prime Minister. If history is our guidance, political or social
instability frequently follow a long period of strongman rule. However, it
might be the exception for Malaysia.
In March 2004, Abdullah Ahmad Badawi called for a snap national election,
and won a bigger share of the vote Dr. Mahathir ever secured. He made mild
cabinet changes and kept Dr Mahathir's original cabinet members—including
several accused of corruption—in the top jobs. While critics might question
his intention of reforms, his move would preserve political stability in
Abdullah Ahmad Badawi is not without reform mind. He promised more openness
and accountability in government, less corruption, fewer expensive prestige
projects, more rural development, etc. Before the March election, he had
already cracked down on corruption, unraveled deals between the government
and connected businesspeople, and demanded greater transparency. Other
results include multibillion-dollar Mahathir-era infrastructure projects
canceled, government stake in Telekom Malaysia sold to Singapore,
open-tender government contracts called for, and Malaysia reinstated on
CalPERS investment list.
Malaysia’s Equity Market Will Attract More Foreign
On September 2, Abdullah Ahmad Badawi released Anwar Ibrahim, former deputy
prime minister from prison, who marshaled street protests against Mahathir
in 1998 and was subsequently arrested and sentenced to prison terms totaling
15 years for corruption and sodomy.
Bloomberg reports: Malaysian stocks surged as investors welcomed the
decision to release Anwar, a former Mahathir protege who was sacked as
finance minister in 1998 and who maintained his convictions were politically
motivated. Abdullah, who succeeded Mahathir last October, has pledged more
transparency in government, stepping up efforts to woo back investors
deterred by Mahathir's 1998 imposition of capital controls and a currency
The verdict ``has to be regarded as a positive move,'' said Khiem Do, Hong
Kong-based head of Baring Asset Management's Asian investment team, which
oversees $2.7 billion of Asian assets. ``This is consistent with the trend
of Abdullah in terms of trying to bring about a fairer structure.''
Anwar was seen as heir apparent to Mahathir until he was sacked and later
jailed on charges of corruption and sexual misconduct. His conviction was
criticized by countries including the U.S. and Australia.
``Foreign investors may not have viewed Malaysia charitably in the past
because they think Anwar was jailed unfairly,' said Richard Cohen, senior
vice president of institutional equity sales at CIMB Securities Sdn. in
Kuala Lumpur. ``Investors may commit more funds to a country they view more
``From a foreign perspective it's a signal of change,'' said David Ng, who
helps manage the equivalent of $316 million in stocks and bonds at Hwang-DBS
Asset Management Sdn. in Kuala Lumpur. ``This heralds a new beginning for
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